“Buying Here Is Like Picking Pennies In Front Of A Steamroller” – 10 Reasons To Be Bearish From Credit Suisse
by Tyler Durden
ZeroHedge.com
05/26/2016
ust like the ongoing fascination with $50 oil, everyone wants to know if the S&P will rise above the psychological level of 2,100 (or hit Jeff Gundlach’s “all green” level of 2,200). To be sure, this comes at an awkward time for the big banks, many of whom, Goldman and JPM most notably, have recently warned that the market is either poised to drop, or that every rebound in the S&P should be actively sold (something both the smart money and retail investors have been doing aggressively and as buybacks have trickled down in recent weeks, many are wondering who is buying).
Today, JPM seems to relent modestly on its recent macro pessimism, and notes that for the very near-term, the debate may lean (very slightly) in the favor of bulls for two specific reasons: 1) China appears to be pursuing a strategy of relative CNH/CNY stability (i.e. very orderly and gradual weakening) and 2) investor sentiment remains bearish and skeptical.
However, JPM adds, the latter tailwind has lessened (in fact many are beginning to think the SPX will continue squeezing to >2100) and China remains a risk (Chinese financial officials will apparently press their American counterparts on the Fed’s tightening schedule during the upcoming June 6-7 economic summit between the two countries). Meanwhile, valuations can’t be ignored (they are stretched at present levels). To justify a sustained move through 2100 one needs confidence in a $130+ EPS number for ’17 and clarity on the big outstanding macro issues (what fiscal and monetary policy levers does Japan pull? Does the Fed hike in the summer? Who wins the US presidency in Nov?) and neither is likely for the time being.
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Then, to balance out JPM’s modest bullish tone, Credit Suisse chimed in with a handy list of 10 key reasons why investors and traders should be cautious. Here they are.
Little margin for error. Multiples are elevated and the economic/earnings cycle is aging – this means the margin for error is small and shrinking and thus chasing the SPX at 2100+ is akin to “picking up pennies in front of a steamroller”.
The Rest…HERE
